If interest on capital is to be allowed before distributing profit, which account will be debited?

Correct answer: Profit and Loss Appropriation Account

Interest on capital is not an ordinary operating expense of the firm. It is an appropriation of profit made according to the partnership agreement. Consequently, the Profit and Loss Appropriation Account is debited with the total interest allowed to the partners. The individual partners’ capital or current accounts are credited because they receive this amount. The Bank Account is not debited merely when interest is allowed, since the amount may be credited to the partners without immediate cash payment. The Drawings Account is unrelated because drawings represent withdrawals by partners, not a return allowed on their capital. Thus, option A correctly identifies the account that records the appropriation before the remaining profit is distributed.